As U.S. stocks plummet, has Bitcoin demonstrated its "safe-haven attribute"?
The re-emergence of the triple kill in stocks, bonds, and currencies for dollar assets, along with the weakness of the dollar index, has somewhat supported Bitcoin prices. Additionally, Trump's criticism of the Federal Reserve may unexpectedly benefit cryptocurrencies
As investors sell off dollar assets, Bitcoin and other cryptocurrencies surged significantly on Monday.
On Monday, Trump once again criticized Powell, stating that if "Mr. Too Late" does not cut interest rates soon, the economy will enter a recession. The U.S. experienced a triple whammy of stocks, bonds, and currencies, with the three major U.S. stock indices falling more than 2%, and the Nasdaq briefly dropping nearly 4%. Long-term U.S. Treasuries were sold off, and the dollar index fell to a three-year low. The weakening dollar and broader uncertainty are driving up the prices of cryptocurrencies and gold, which are seen as alternative assets.
(Green line is Bitcoin, red line is Nasdaq)
According to CoinDesk, the price of Bitcoin rose over 4%, breaking through $88,300, the highest intraday level since April 3. Nevertheless, the price of Bitcoin is still about 20% lower than its historical high of $110,000 in mid-January. Larry Tentarelli, chief analyst at Blue Chip, stated in a report:
Bitcoin is currently hovering in the trading range of $75,000 to $90,000, but if it breaks through $90,000, it will see significant gains.
Weak Dollar, Trump's Criticism of the Federal Reserve May Unexpectedly Benefit Cryptocurrencies
The sharp decline in dollar assets has caused the dollar index to plummet to around 98, marking a new low in the past 16 months. With just over a week left in the month, the dollar index is set to record its worst monthly performance since the Fed's QE in 2009.
In addition to the dollar index's weakness providing some support for Bitcoin prices, Trump's criticism of the Federal Reserve may unexpectedly benefit cryptocurrencies. Cantor analyst Brett Knoblauch wrote in a report:
If Trump successfully removes Powell and appoints a more 'dovish' chair, this could be seen as a positive for cryptocurrencies, as Bitcoin and altcoins have historically performed better in low-interest-rate environments.
Ultima Markets analyst Elon stated that the Fed's future easing monetary policy may bring more liquidity to Bitcoin. The price of Bitcoin is positively correlated with the global M2 money supply, and current M2 leading indicators suggest that the trend is on the rise.
